Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue  NSWCATAP 249
|Date of judgement||25 November 2015||Proceeding No.||AP 15/03440|
|Judge(s)||P Durack SC, Senior Member
S Frost, Senior Member
|Court or Tribunal||Appeal Panel, NSW Civil and Administrative Tribunal|
|Legislation cited||Administrative Decisions Review Act 1997
Civil and Administrative Tribunal Act 2013
Payroll Tax Act 2007
Taxation Administration Act 1996
|Catchwords||Appeal – payroll tax – employment agency contract - penalties|
|Cases cited||Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs  FCAFC 184
Bushell v Repatriation Commissioner  HCA 47
Collins v Administrative Appeal Tribunal (2007) 163 FCR 35
Collins v Urban  NSWCATAP 17
Cornish Investments Pty Ltd v Chief Commissioner of State Revenue  NSWADTAP 25
Dranichnikov v Minister for Immigration and Cultural Affairs (2003) 197 ALR 389
Freelance Global Ltd v Chief Commissioner of State Revenue  NSWSC 127
Haritos v Commissioner Taxation  FCAFC 92
Minister for Immigration and Border Protection v MZYTS  FCAFC 114 at , 239 FCR 431
Minister for Immigration & Ethnic Affairs v Wu Shang Liang (1996) 185 CLR 259
Minister for Immigration and Cultural Affairs v Yusuf (2002) 206 CLR 323
Mulligan v National Disability Insurance Agency  FCA 544
Nufarm Australia Ltd v Dow AgroSciences Australia (No. 2) (2011) 282 ALR 24
Prendergast v Western Murray Ltd  NSWCATAP 69
Stead v State Government Commission  HCA 54, 161 CLR 141
The taxpayer is a company that was involved in the welding industry. The taxpayer paid amounts to welders for work done on certain projects for its clients.
At first instance, the issue that arose was whether the taxpayer was an “employment agent” who procured the services of workers for its clients under an “employment agency contract”, within the meaning of section 37 of the Payroll Tax Act 1997 (“the Act”) which stated:
The taxpayer argued:
“that the employment agency provisions in the Payroll Tax Act did not apply because what it was required to undertake for its clients was the achievement of a result in the form of completion of specific welding works, and not simply the supply of the services of welders and boilermakers. Qualweld likened its role to a builder performing a contract for works, making use of sub-contractors, rather than one of agency for the supply of contractors.”
Material before the Tribunal which included written agreements between the taxpayer and the welders and boilermakers. Evidence of the informal and oral agreement between the taxpayer and its main client was adduced orally and in writing by witness statements, quotes, a purchase order and invoices. The witnesses were cross examined.
The Tribunal held that “whilst there were elements of the [taxpayer’s] role that went beyond the mere provision of services, these elements were no more than largely incidental to procuring the supply of services”. Therefore, the Tribunal concluded an employment agency contract existed and the wages paid by the taxpayer to the welders and boilermakers were liable to payroll tax.
Grounds of appeal
The taxpayer appealed on the following grounds:
Tribunal’s reasons were inadequate;
The Tribunal misconstrued section 37 of the Act; and failed to exercise its jurisdiction to conduct a review of the assessment by failing to consider the taxpayer’s evidence as to the factual context of the agreements and their oral terms; and
The Tribunal denied the taxpayer procedural fairness where the Tribunal failed to consider relevant evidence relating to taxpayer’s client contracts, and where the Tribunal refused to allow oral evidence of Mr Kwon at the hearing relevant to the taxpayer’s client contracts and documents before the Tribunal.
Appeal Panel decision
The Appeal Panel found that the Tribunal did not consider relevant evidence from the taxpayer’s witnesses and this constituted an error of law.
The Appeal Panel stated that the nature and scope of the taxpayer’s obligations under the oral contract with their major client, Power Projects International (“PPI”) was “an important consideration in the determination of [the taxpayer’s] case.
Evidence was presented from the taxpayer’s witnesses, (Mr Kim of PPI and Mr Kwon, the director of the taxpayer) which was not referred to by the Tribunal and that “was, at least, arguably inconsistent with the ultimate conclusions of the Tribunal below.”
The Appeal Panel stated
“such evidence was capable of establishing (we do not say it did so establish) a responsibility on the part of [the taxpayer] to deliver a result, and not just responsibility to supply the service of welders and boilermakers, and, furthermore, not just a responsibility to ensure that these tradespeople would be qualified to carry out that work to the standards required, as the Tribunal below found”.
The evidence was relevant to constructing the terms and conditions of the oral contract between the taxpayer and PPI, and whether there was an employment agency contract.
The Appeal Panel found that the Tribunal below should have referred to this evidence and that it did not. Therefore, the Tribunal erred in law as it failed to determine the correct and preferable decision having regard to the material before it (s.63(1) of the Administrative Decisions Review Act 1997).
The Appeal Panel did not find that the Tribunal misconstrued section 37 of the Act, and in particular, the scope of the term “contract” within that section.
However, the Appeal Panel did hold that, in circumstances where the contract was informal and oral, the Tribunal erred in law by examining only documentary evidence when considering the relationship between the taxpayer and PPI. The Appeal Panel considered that this amounted to a denial of natural justice and a failure to give adequate reasons. Although it was not necessary for the Tribunal to specifically address all the evidence, it was necessary to consider evidence which could have affected the outcome.
The Appeal Panel found that the Tribunal failed to give adequate reasons for its decision ant his also constituted an error of law. The Tribunal did not consider relevant evidence regarding the terms of the relationship between the taxpayer and PPI. The Tribunal needed to make findings in relation to such evidence and explain its conclusion regarding whether or not there was an employment agency contract based on such findings.
The Appeal Panel did not consider it necessary to determine whether the Tribunal had denied the taxpayer procedural fairness by failing to allow additional oral evidence to be given by Mr Kwon at the hearing.
The Appeal Panel ordered that the Tribunal decision be set aside and the whole matter be reconsidered by the Tribunal differently constituted from the Tribunal at first instance.